Some recent articles out of China and our Chinese contacts are telling us that there was a particular emphasis on the part of companies and private individuals within China to stockpile metals during the first half of this year. Worth noting here is that not all the stockpile purchases were done by the government, as is commonly thought.
As the credit gets tighter within China, the stockpiling should stop. This means that a good portion of the first half non-government metal purchases that we thought was consumed was really stockpiled. Therefore the overhang of this metal and the government stockpiles on the Chinese market should cap physical market tightness. This begs the questions: are the current market rallies justified by real consumption?
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